Warren Urges Yellen to Crack Down on Cryptocurrency

In a recent letter, Senator Elizabeth Warren (D-Mass.) urged Treasury Secretary Janet Yellen to work through the Financial Stability Oversight Council, which she chairs, to develop a regulatory strategy on cryptocurrencies. Warren has warned increasingly that cryptocurrencies pose major risks to the financial system.

“I have become increasingly concerned about the dangers cryptocurrencies pose to investors, consumers, and the environment in the absence of sufficient regulation in the United States,” Warren wrote. “However, as the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, the Council must determine whether these trends raise concerns beyond investor and consumer protection and extend to broader systemic vulnerabilities that could threaten financial stability.”

There are currently more than 2,000 digital currencies in circulation with a market value that could exceed $2 trillion, Warren noted. She also highlighted risks to hedge funds, stablecoins, decentralized finance, and banks.

“FSOC should review this matter and determine whether it is appropriate to utilize its statutory authority to contain the systemic risks posed by the growing cryptocurrency market,” said Warren. “The longer that the United States waits to adapt the proper regulatory regime for these assets, the more likely they will become so intertwined in our financial system that there could be potentially serious consequences if this market comes under stress.”

Warren released the letter prior to a Senate Banking Committee hearing about cryptocurrency on August 3. On the same date, the Senate Judiciary Committee was scheduled to hold a hearing on ransomware, and the House Financial Services Committee (HFSC) was set to hold one on central bank digital currency.